This Road Better Not Lead to Rome

It was the Golden Age that lasted for over 200 years…

It was called the Pax Romana (“Roman Peace”).

During this period, the Roman Empire spanned from England in the north … to Morocco in the south … and Iraq in the east.

That’s why the empire built an extensive system of roads. And all roads actually did lead to Rome.

Citizens were secure. The government maintained law, order and stability. And major advances in engineering, architecture and art were made.

But who would’ve imagined that only two centuries later, the mighty Roman Empire would fall?

And the reason it fell is the same one I see staring the U.S. right in the face now…

History Rhymes

At first, the economy of the Roman Empire prospered, helped by robust trade and low taxes.

And then, the Plague of Galen spread throughout the empire. Scholars generally believe it was smallpox.

Many people died. The labor market was tight. And the supply chain hit a wall.

The Roman Empire devalued its currency to keep the economy going.

This sparked inflation, and the prices of goods doubled.

Instead of containing inflation, the empire’s fiscal policy unleashed it.

At one point, it soared as high as 15,000%. Several emperors tried to fix the failing economy by increasing taxes and enacting price controls.

Those policies failed miserably.

And over the next few centuries, the Roman Empire fell.

Such are the dangers of inflation. Charlie Munger — Warren Buffett’s business partner — was blunter. He said:

“Inflation is the way democracies die.”

The Roman Empire vs. America Today

Just last Thursday, I sat down with Steve Gruber on America’s Voice Live to discuss Munger’s comments. You can check out our interview right here.

Do you agree or disagree with the comparisons I’m seeing today? Let me know what you think by writing in at RealTalk@BanyanHill.com.

Back to the Future

The last time inflation was this high was in 1982 — 40 years ago.

Anyone who lived through that time knows what I’m talking about.

It wasn’t a fun time to say the least.

I had confidence that policymakers learned their lesson. But sadly, that’s not the case.

The government recently reported the year-over-year increases in consumer prices. And they’ve felt like a kick in the teeth.

Prices are up 50% for gasoline, 37% for used cars and trucks and 21% for steak.

It’s like 1982 all over again.

Unless you’re living under a rock (or working at the Federal Reserve), there’s no way you haven’t felt the effects of inflation. And let me tell you, I share your pain.

The purchasing power of the dollar continues to fall. It’s melting faster than an ice cream cone on a hot summer day.

So, if your investment returns aren’t higher than the rate of inflation, you’re losing money.

Now that I’ve laid out the problem, I want to give you a solution…

One Step Ahead

The good news is that in Alpha Investor, we recommend companies that’ll continue to do well during periods of inflation.

These companies’ services are in need, no matter the state of the economy.

They have pricing power. They can raise prices and not see revenue drop off.

These are the types of businesses that can keep pace with inflation. So, you want to own them during inflationary times like we’re seeing now.

Companies in our Alpha Investor portfolio, such as Coca-Cola and FedEx, have raised prices. But their customer demand has not gone down.

They’re currently trading above their buy-up-to prices, so I wouldn’t recommend buying shares today.

But several other companies in the portfolio are currently trading below my recommended buy-up-to price — like the ones I sent out in our Alpha Investor shopping list early this week.

Alpha Investors still have the opportunity to buy shares of them at a bargain today. And I’ll be sending my next recommendation out soon. So, keep an eye on your inboxes.

Regards,
Charles Mizrahi